Riverside County's economy has bottomed out and begun to grow, but only gradual improvement is anticipated in its housing and labor markets, economists said Tuesday.

"We're going to grow," said
Mira Farka
, a Cal State Fullerton economist. "But in the shade."

And that means the local tax revenue Riverside County government depends on to cover operating costs is going to dip yet again next year, Farka said.

She and another
Cal State Fullerton
economist, along with an independent Los Angeles economist, provided a peek into the murky future Tuesday for the Riverside County Board of Supervisors.

Fueled by the downturn in the real estate market, property values have declined for three straight years. They are expected to slide again by 2.1 percent in the fiscal year that begins July 1, said Fullerton economist
Adrian Fleissig
.

Then a slight improvement of 0.5 percent is anticipated in fiscal year 2013-14, with growth of 2 percent forecast the following year, Fleissig said.

The total assessed value is $2 billion, with homes accounting for 66 percent of that and commercial properties 25 percent.

Ed Corser, the county's chief financial officer, said the continuing decline is troubling, since the county gets 80 percent of its general fund revenue from property taxes.

The county already was working to close a $13 million gap in its $570 million general fund budget through cuts and 229 layoffs. The additional property-value decline will increase the shortfall by $10 million to a total of $23 million, Corser said.

Corser told supervisors they will have to overcome a total shortfall of $30 million by late 2012.

Besides shrinking revenue, there are new costs of $2 million associated with labor contracts approved recently and $5 million to operate a public-safety radio system scheduled to go online in December, he said.

Total revenue could fall to $560 million for fiscal year 2012-13, with the $10 million decline in property values. Annual revenue has plummeted by $225 million from the peak of $785 million in fiscal 2006-07, at the height of the housing boom.

Much of the reason for the county's financial predicament is the collapse that followed that boom.

Over the last year, the situation has improved ever so slightly, the Fullerton economists said. But Riverside County home values are still hovering at $200,000.

That's more than 53 percent below the peak of $431,713 in June 2006, the economists said in a companion
written report
to the board.

Housing prices are expected to decline a little from their current levels before stabilizing in late 2012 and early 2013, according to the report. But they don't expect meaningful appreciation until late 2015.

"The county still has the highest foreclosure rate in Southern California, and the second highest in the state of California," the report states. "A total of 41,319 mortgage default notices, auction sale notices and bank repossessions were recorded in the county in 2011 ---- 1 in 19 households."

Meanwhile, the job market is recovering gradually.

Fleissig said Riverside County's unemployment rate is expected to average 12.3 percent this year, after coming in at 13.4 percent for 2011 and 14.5 percent in 2010.

Looking ahead, he said, the rate should improve to 11.4 percent in 2013 and 10.2 percent in 2014.

Los Angeles economist
Christopher Thornberg
said the Inland Empire labor market of Riverside and San Bernardino counties combined grew by nearly 1 percent year over year in March to 1,138,400 jobs.

In comparison, San Diego County's job total grew by 0.5 percent during the same period, Thornberg said.

"Clearly, the Inland Empire is starting to move forward," he said. "The worst of the real estate crisis is behind us."

Still, Fleissig said it is important to note that many of the new jobs provide moderate wages.

During the housing crash, Riverside County lost thousands of high-paying real estate and construction jobs, Fleissig said. And he said that high-paying employment won't be replaced for some time.